From Strategy to Activity Plans: How to Keep Learning
Introduction
As we’re in the midst of the planning cycle and by this, the question of what constitutes a strategy and its connection to activity planning has resurfaced in my mind. Several perspectives have struck a chord with me, particularly the factors that define a good strategy and how the bank’s business model might need to adapt in order to stay relevant amidst the ever-changing landscape.
With this blogpost, I aim to consolidate my thoughts on this subject, not merely to continue reflecting, but to organize these ideas in a coherent and structured manner.
What is Strategy?
According to Wikipedia, strategy is a general plan to achieve one or more long-term or overall goals under conditions of uncertainty. So, there is the general plan. And it's devised to achieve long-term goals, ok so far.
According to Richard Rumelt in Good Strategy Bad Strategy, a good strategy consists of three key elements (the kernel):
Diagnosis
Guiding policy
Coherent action
Building the strategy begins with a clear understanding of the challenges your organization faces, followed by a general approach to addressing these challenges, and finally, a set of well-coordinated actions designed to implement the guiding policy.
Rumelt emphasizes that a good strategy is not merely a collection of goals or aspirations; instead, it is a cohesive and actionable plan that addresses specific challenges and focuses on achieving tangible results. In contrast, bad strategy is characterized by vague objectives, lack of focus, and a failure to confront the critical issues and challenges that the organization or individual faces.
On a more classical note, Michael E. Porter defines strategy as the set of actions and choices that an organization makes to create a unique and sustainable competitive advantage. Porter emphasizes the importance of making deliberate choices to position your retail bank favorably within the competitive landscape, focusing on either cost leadership, differentiation, or targeting a specific market segment.
Exploring some further remarks on three more authors whose books I’ve read in the last year:
A successful strategy must also account for the disruptive innovations that can reshape industries, as emphasized by Christensen in Innovator’s Dilemma.
Building a learning organization that continuously adapts to the changing environment, as advocated by Senge in The Fifth Discipline, is equally important.
Finally, we must be prepared to reinvent their business models to stay competitive and capitalize on new opportunities, as suggested by Johnson in Reinventing Business Models.
Keeping a Bank’s Strategy Up to Date and Relevant
As the operating landscape continues to evolve, we are witnessing material changes from a rate environment perspective and in terms of emerging market trends and technologies. Navigating these changes requires a proactive approach to strategy formulation and adaptation. Below are some key insights that have resonated with me from the materials I've gone through recently, which could help keep a bank's strategy and its execution up to date and relevant
Embrace disruptive innovation: Christensen's work in "The Innovator's Dilemma" highlights the importance of recognizing and embracing disruptive innovations that can transform industries and create new market opportunities. According to this, one must be willing to invest in and adopt emerging technologies and business models that challenge the status quo, even if it means disrupting their existing operations.
Foster a culture of continuous learning: Peter Senge, author of "The Fifth Discipline," emphasizes the importance of building a learning organization that can adapt and thrive in a complex and dynamic environment. To support this, one should encourage employees to stay informed about industry trends, emerging technologies, and changing customer preferences, and promote a culture of continuous learning, experimentation, and improvement.
Regularly review and reassess your strategy: As suggested by Rumelt in "Good Strategy Bad Strategy," periodic reviews of the bank's strategy are critical to evaluate its effectiveness and alignment with current market conditions, customer needs, and organizational goals. One should be prepared and open to adjust the strategy as needed to address emerging challenges or opportunities.
Reinvent your business model: Mark W. Johnson, co-author of "Reinventing Your Business Model," argues that organizations must periodically reevaluate and reinvent their business models to stay competitive and capitalize on new opportunities. How does one assess the viability of the current business model? Further concepts on this include exploring innovative approaches to delivering value to customers, such as leveraging digital channels, partnering with fintech firms, or targeting underserved market segments. A bit broad, but has interesting kernels.
Balance exploitation and exploration: Drawing from Rumelt's insights on coherent actions, one should strike the right balance between exploiting their existing capabilities and resources and exploring new opportunities and innovations. This involves allocating resources and attention between optimizing current operations and investing in initiatives that drive future growth and competitiveness.
Conclusion
In conclusion, a winning strategy is vital for us to navigate the challenges and opportunities presented by today's dynamic and competitive financial environment. While focusing on the core customer promise, one needs to keep evolving the strategy through fostering a culture of continuous learning, balancing exploitation and exploration, and yes, even periodically reinventing the business model.
With customers increasingly demanding the same seamless experiences they enjoy in other aspects of their lives, it's essential for us to treat innovation not as an option, but as a necessity. Even the simple-looking startups may seem unthreatening at first glance, but they have the potential to eat into the core business of a bank.
Resources
Some books, articles I've read on the subject in the last 1-2 years and used for the current blog post: